Meritage Hospitality Group, one of the largest franchisees of Wendy’s, filed for Chapter 11 bankruptcy protection on Thursday in the U.S. Bankruptcy Court for the Western District of Michigan, marking another significant strain on the fast-food chain’s franchise network.
Meritage operates 314 Wendy’s locations across 15 states, representing roughly 5% of Wendy’s U.S. system. The company also manages one Bojangles and five independently branded concepts. In its bankruptcy filing, they stated it intends to maintain restaurant-level operations and continue paying its approximately 9,000 team members without disruption.
The filing follows a “candid assessment” of Meritage’s financial standing, revealing persistent challenges within the Wendy’s system over recent years. Wendy’s has reported double-digit same-store sales declines in recent quarters and is currently pursuing a turnaround strategy under new CEO Robert Wright.
According to a May report from Meritage’s CEO, beef inflation, deep discounting under former leadership and marketing misses contributed to store-level margins reaching a 30-year low. Store-level EBITDA dropped by 48%, prompting the company to request forbearance earlier this year before resuming full interest payments in the second quarter.
Restructuring Moves Aim to Stabilize Performance
To improve financial health, Meritage closed 60 underperforming locations and exited or modified breakfast service at about 120 others. While these changes negatively impacted comparable sales, they generated an immediate EBITDA margin benefit exceeding $11 million. They also reduced over $7 million in general and administrative costs through internal restructuring.
In March, Meritage launched a catering pilot with EzCater across 150 restaurants, followed by a full rollout in May. Average checks have been about $500 with a minimum order for 10 people.
“After more than a year of working constructively with its lenders and its franchisor toward a solution, the Company’s Board of Directors and management team determined that a voluntary, court-supervised restructuring is the most effective and proactive path to strengthen Meritage’s finances, address these headwinds directly, and protect the long-term interests of its stakeholders, team members, guests, and communities,” the company said in its press release.
Meritage’s bankruptcy is among the largest Wendy’s franchise failures since NPC International’s 2020 filing during the pandemic, which led to the sale of its 393 Wendy’s units and over 900 Pizza Hut locations. Unlike NPC’s pandemic-driven collapse, Meritage faces a different set of pressures, including ongoing consumer pullback due to inflation.